US Federal Reserve chairman Ben Bernanke has told Congress the US economy will grow gradually this year and pick up pace in 2008. But he warned that there were many risks to the outlook and stressed that the US central bank was on guard against inflation.
Bernanke also warned that a slowdown in the US housing market may last longer than anticipated, and said further hikes in energy and commodity prices could spark inflation and push closely watched core inflation up.
The Fed chairman also cautioned that a recent easing in core inflation, while welcome, may be the result of temporary influences. He said 'a sustained moderation in inflation pressures yet to be convincingly demonstrated, the (Fed's policy panel) has consistently stated that upside risks to inflation are its predominant policy concern," he said.
Earlier, official figures showed that US consumer prices rose by a slightly bigger than expected 0.2% in June due to higher food costs.
Last month's gain was slightly larger than the 0.1% advance Wall Street economists were expecting to see after a fall-off in energy prices. The 0.2% increase in the more closely watched core prices index, which excludes food and energy, was in line with expectations.
Food prices rose 0.5% in June, continuing a string of increases. Energy prices were down 0.5% last month.
Core prices were up 2.2% from the same time a year ago, this was in line with expectations. The headline annual rate of inflation was 2.7%.
Separate figures showed that US new home construction rose 2.3% in June but the new building figure for May was revised lower.
The Commerce Department said housing starts increased to a seasonally adjusted annual rate of 1.467 million homes, but this was still almost 20% below the rate for the same month last year.
The agency revised down its estimate for May new home building to a pace of 1.434 million from an original estimate of 1.474 million units. The report also revealed that housing permits, which give an indication of future housing starts, fell 7.5%.
